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Can Value Investors Consider Universal Health (UHS) Stock?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Universal Health Services, Inc. (UHS - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Universal Health has a trailing twelve months PE ratio of just 14.85, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 18. Also, if we focus on the long-term PE trend, Universal Health’s current PE level puts it below its midpoint of 16.22 over the past five years.
The stock’s PE compares quite favorably with the Medical Market’s trailing twelve months PE ratio, which stands at 20.72. This indicates that the stock is undervalued right now, compared to its peers.
Meanwhile, Universal Health has a forward PE ratio (price relative to this year’s earnings) of 14.51, which is slightly lower than the current level. So, it is fair to say that a slightly more value-oriented path may be ahead for Universal Health stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Universal Health has a P/S ratio of just 1.18. This is quite lower than the S&P 500 average, which comes in at 3.18x right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Universal Health currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Universal Health a solid choice for value investors.
What About the Stock Overall?
Though Universal Health might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of B and a Momentum Score of C. This gives UHS a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen two estimates go down in the past sixty days compared to three upward revisions, while the full year estimate has seen no down and six up in the same time period.
This has had a positive effect on the consensus estimate. While the current-quarter consensus estimate has remained stable over the past two months, the current-year estimate has shot up 2.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Universal Health Services, Inc. Price and Consensus
Such positive analyst sentiments is the reason why the stock has a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Bottom Line
Universal Health is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite a sluggish industry rank (among Bottom 33% of more than 250 industries), a Zacks Rank #2 instills optimism in the stock.
Also, over the past two years, the broader industry has clearly outperformed the market at large, as you can see below:
We believe, that despite a sluggish industry rank, a satisfactory past industry performance and a good Zacks rank signal that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this robust value metrics, and we believe that we have a strong value contender in UHS.
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A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
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Can Value Investors Consider Universal Health (UHS) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Universal Health Services, Inc. (UHS - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Universal Health has a trailing twelve months PE ratio of just 14.85, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 18. Also, if we focus on the long-term PE trend, Universal Health’s current PE level puts it below its midpoint of 16.22 over the past five years.
The stock’s PE compares quite favorably with the Medical Market’s trailing twelve months PE ratio, which stands at 20.72. This indicates that the stock is undervalued right now, compared to its peers.
Meanwhile, Universal Health has a forward PE ratio (price relative to this year’s earnings) of 14.51, which is slightly lower than the current level. So, it is fair to say that a slightly more value-oriented path may be ahead for Universal Health stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Universal Health has a P/S ratio of just 1.18. This is quite lower than the S&P 500 average, which comes in at 3.18x right now. Also, as we can see in the chart below, this is below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Universal Health currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Universal Health a solid choice for value investors.
What About the Stock Overall?
Though Universal Health might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of B and a Momentum Score of C. This gives UHS a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen two estimates go down in the past sixty days compared to three upward revisions, while the full year estimate has seen no down and six up in the same time period.
This has had a positive effect on the consensus estimate. While the current-quarter consensus estimate has remained stable over the past two months, the current-year estimate has shot up 2.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Universal Health Services, Inc. Price and Consensus
Universal Health Services, Inc. price-consensus-chart | Universal Health Services, Inc. Quote
Such positive analyst sentiments is the reason why the stock has a Zacks Rank #2 (Buy) and why we are looking for outperformance from the company in the near term.
Bottom Line
Universal Health is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite a sluggish industry rank (among Bottom 33% of more than 250 industries), a Zacks Rank #2 instills optimism in the stock.
Also, over the past two years, the broader industry has clearly outperformed the market at large, as you can see below:
We believe, that despite a sluggish industry rank, a satisfactory past industry performance and a good Zacks rank signal that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this robust value metrics, and we believe that we have a strong value contender in UHS.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>